INSIGHTi

Vietnam’s Nonmarket Economy (NME) Status
March 4, 2024
Shortly after extending normal trade relations (NTR) status to Vietnam in 2001, the United States
designated Vietnam as a “nonmarket economy” (NME) for the purposes of antidumping and
countervailing duty (AD/CVD) cases. The government of Vietnam has long sought to remove the
designation, arguing it may hinder closer ties. Vietnam officially submitted a removal request on the eve
of President Joseph Biden’s September 2023 visit to Hanoi, where he and Communist Party of Vietnam
(CPV) Secretary-General Nguyen Phu Trong elevated the U.S.-Vietnam relationship to a “comprehensive
strategic partnership.” In a joint statement, Biden said the United States would review the request “as
expeditiously as possible, in accordance with U.S. law.” On October 30, 2023, the Department of
Commerce initiated a review of Vietnam’s NME status. Since then, some Members of Congress have
raised concerns over whether Vietnam meets the conditions to be designated as a market economy.
Nonmarket Economy Status under U.S. Trade Laws
The Department of Commerce has the authority to designate countries as NMEs for the purpose of U.S.
antidumping and countervailing duty (AD/CVD) laws. An NME is a country that Commerce determines
“does not operate on market principles of cost or pricing structures, so that sales of merchandise in such
country do not reflect the fair value of merchandise.” In designating a country as an NME, Commerce
considers the extent to which (1) the country’s currency is convertible; (2) its wage rates result from free
bargaining between labor and management; (3) joint ventures or other foreign investment are permitted;
(4) the government owns or controls the means of production; and (5) the government controls the
allocation of resources and price and output decisions. Commerce may also consider other factors that it
considers appropriate. An NME designation remains in effect until revoked by Commerce. There are
currently 12 countries, including Vietnam, designated as NMEs. Commerce designated Vietnam as an
NME in 2002 during its antidumping investigation into Vietnamese catfish exports.
Commerce’s usual practice of applying alternative methods when calculating dumping margins in
antidumping investigations involving NMEs generally leads to higher tariffs in affirmative
determinations. These methods have raised concerns at the WTO that a subsidy may be offset twice when
both antidumping and countervailing duties are applied to NME products.
After Commerce published the notice initiating the changed circumstances review of Vietnam’s NME
status, interested parties were able to submit comments to Regulations.gov. U.S. manufacturing groups
have expressed opposition to removal of Vietnam’s NME status. On the other hand, the National Retail
Congressional Research Service
https://crsreports.congress.gov
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Federation supports designating Vietnam as a market economy, citing the country’s overall reforms,
including openness to foreign investment, free bargaining of wages, and currency convertibility. Per
regulations, Commerce is to issue a final decision by July 26, 2024, 270 days after initiating the review.
U.S.-Vietnam Relations
Since 2010, the United States and Vietnam have forged a strategic partnership on many regional security
and economic issues, prompted in part by shared concerns about China’s increased assertiveness in the
region, and by burgeoning economic links. Over the last decade, Vietnam has become a major
manufacturing center and one of the United States’ top 10 trading partners. Vietnam is a major source of
imported consumer electronics, furniture, semiconductors and parts, apparel, and footwear. It is the
second-largest source of U.S. apparel imports, after China. The September 2023 upgrade in relations was
accompanied by several initiatives, including U.S. pledges to support Vietnam's development of its
semiconductor industry (including with $2 million in U.S. government funds) and digital infrastructure
($12 million). Additionally, agreements under the U.S.-led, 14-country Indo-Pacific Economic
Framework for Prosperity (IPEF) negotiations, which includes Vietnam, may further deepen U.S.-
Vietnam economic ties.
Under the doi moi (renovation) economic reforms that began in 1986, the Vietnamese government
abandoned many aspects of central state planning, cut subsidies to state enterprises, reformed the price
system, and opened the country to foreign direct investment (FDI). In a 2022 report, the Organization for
Economic Cooperation and Development (OECD) noted that the number of state-owned enterprises
(SOEs) has decreased significantly, but SOEs still account for roughly 30% of the GDP. The U.S.
government also actively monitors Vietnam’s currency practices, which were subject to U.S.
investigations before the countries reached a bilateral agreement in July 2021. Vietnamese authorities
limit daily fluctuations in the Vietnamese dong to 5% against the dollar, adjusted from 3% in 2022.
Considerations for Congress
Congress may conduct oversight of Commerce’s review of Vietnam’s NME status through consultations,
letters, and hearings to address concerns that the process has been rushed and to ensure Vietnam meets the
conditions of a market economy under U.S. statute. In conducting oversight, Congress may consider the
potential implications of the decision on U.S.-Vietnam trade, and overall bilateral relations. Other options
for Congress might include linking the decision to other policy areas, such human rights and/or foreign
assistance.
Under the terms of its World Trade Organization (WTO) accession agreement with the United States in
2007, Vietnam was to retain its NME designation “until such time as Vietnam is no longer treated as a
nonmarket economy or for 12 years after Vietnam becomes a WTO member.” The U.S. Trade
Representative indicated during a 2019 WTO dispute settlement proceeding that Vietnam’s NME status
remained because Vietnam had not challenged Commerce’s designation. Since the September 2023
upgrade to the relationship, Vietnamese leaders have indicated that retaining the NME designation might
negatively affect bilateral relations.
Congress may consider whether Vietnam’s economic reforms have been sufficient to satisfy the statutory
conditions. Some of Members of Congress have argued that Vietnam does not meet the conditions,
including the prominence of state-owned enterprises (SOE) in Vietnam’s economy, “severe deficiencies”
in Vietnam’s labor laws, and potential harm to U.S. industries and workers.
Congress also may consider Vietnam’s human rights record, which some observers say, is poor and
worsening. The Vietnam Human Rights Act (H.R. 3172), which would prohibit U.S. assistance to

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Vietnam's Ministry of Public Security and require the executive branch to put more emphasis on ensuring
internet freedom in Vietnam, could be a potential vehicle for Members of Congress.

Author Information

Liana Wong
Mark E. Manyin
Analyst in International Trade and Finance
Specialist in Asian Affairs





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